InformationWeek

December 18/25, 2000

http://www.informationweek.com/817/lockin.htm

Break Out

Getting locked into an ERP suite is less of a concern these days as vendors add new functionality and introduce a broad range of integration schemes for third-party apps

By Steve Konicki

ot long ago, software buyers, industry pundits, analysts, and large consulting firms fretted that enterprise resource planning software, while virtually a requirement for managing business, had a severe downside. Once you installed a vendor's ERP package, you were locked into that software. Adding functionality from another vendor's products would likely require a major integration project that could take years and cost an enormous amount of money. The result: Many companies simply held off on adding functionality to their business systems--features such as E-procurement, customer-relationship management, and supply-chain planning and execution--in the hope that their ERP vendors would one day deliver the capabilities they needed.

Wishes can come true. In the past year, ERP vendors such as J.D. Edwards, Oracle, PeopleSoft, and SAP have added modern business tools to their traditional complement of financial, accounting, human resource, production management, and other core offerings. J.D. Edwards, PeopleSoft, and SAP say the new functions are so close to best-of-breed that users may not need anything else. Oracle CEO Larry Ellison is especially vocal on the topic, telling almost anyone who will listen that all a company needs is the Oracle 11i E-business suite because it provides best-of-breed functionality in virtually every product area. This isn't all public-relations puffery on the part of the vendors, either: Some users and analysts agree that the new generation of ERP software rivals the kind of systems that can be built by integrating best-of-breed offerings from numerous third-party vendors.

ERP vendors are improving their offerings in a variety of ways. All the major players have built some new application modules themselves. Additionally, some vendors have acquired technology from leaders in the field, as PeopleSoft did when it bought CRM software vendor Vantive Corp.; and others have pre-integrated best-of-breed offerings with their products, as J.D. Edwards does with CRM products from Siebel Systems Inc. and E-procurement software from Ariba Inc. At the same time, ERP vendors as a group are offering a broad range of open integration schemes, including XML messaging and proprietary connectors or open APIs, that make it simpler for their customers to manage integration with third-party applications without the need for lengthy, complex integration projects.

Colgate-Palmolive Co., which manages most of its global operations on SAP's ERP platform and integrates some legacy systems, doesn't consider itself locked into SAP, especially since the vendor began offering much of the business functionality that the best-of-breed approach offers. Packaged apps can provide a full suite of capabilities at a much lower price than buying and integrating a set of best-of-breed apps. The consumer-products company has begun implementing SAP's new CRM, B-to-B inventory management, demand-planning, and business-warehousing software into its mix. It began deploying SAP's core offerings more than five years ago to beef up a centralized business organization and now runs seven different instances of the ERP software vendor's apps to manage operations in 47 countries. "The time it's taken for [SAP's new] products to mature is acceptable to us, because it outweighs having to integrate point products," CIO Ed Toben says. "The value of having one umbrella is greater than individual points."

Since deploying SAP's main ERP applications worldwide, Colgate-Palmolive has saved $150 million by reducing working capital and inventory. "We're clearly joined at the hip with SAP," Toben says. "Our goal is to take a lot of time and therefore a lot of money out of the supply chain. The closer we are to one information flow, from purchase order to money in the bank, the better."

Of course, no application is an island. While Colgate-Palmolive is developing a B-to-B strategy that includes a mySAP.com-based private exchange to connect the company with its suppliers, it also expects to integrate its SAP applications with Transora, the food, beverage, and consumer-packaged-goods exchange powered by software from Ariba Inc. and i2 Technologies Inc. Business conducted by Colgate-Palmolive on the marketplace, which is expected to be live by year's end, will be handled by SAP apps, which can be tightly integrated with third-party processes via XML messaging. "We're doing that already with suppliers. They're getting to our SAP information so they can look at our product plans and inventory levels and automatically replenish our materials," Toben says.

With the deployment of the Web-architected PeopleSoft 8, Green Mountain Coffee Inc., an $84 million coffee producer in Waterbury, Vt., is able to more easily integrate its ERP applications with its B-to-B Web site; the company hopes to increase the amount of business it does with other businesses and consumers over the Internet.

But the company says that PeopleSoft's simple integration with third-party software via XML and other data formats is also letting it regain use of its Belltek System Design Inc. handheld inventory scanning software and scanners. Green Mountain Coffee had been using the scanners for inventory tracking of grocery-store deliver-ies until it deployed an earlier version of PeopleSoft ERP apps several years ago. At that time, it would have been difficult and expensive to integrate the ERP apps with the software that controls the handheld scanners.

Photo by Craig Line Green Mountain Coffee is looking forward to pulling out the scanners, dusting them off, and starting to use them again, says CIO Jim Prevo. "Some customers will say, 'Gee, we forgot to order this,' so we'll leave what they need or we'll have to inventory their existing stock and replenish it. The scanners get rid of a lot of paperwork--two to three pieces at each stop--and let our drivers use the time in a better way." Prevo says shaving minutes from each stop will enable a driver to service more stops in one day.

But like Colgate-Palmolive, Green Mountain says there are some things worth waiting for an ERP vendor to deliver. The company has deployed PeopleSoft 8's manufacturing, distribution, financial, and human-resources management modules. It's now eager for PeopleSoft to complete integration of its recently acquired Vantive CRM software. "We've taken the attitude that we'll wait for some features we want because PeopleSoft will develop them," Prevo says. "The appeal of PeopleSoft for us is the tightness of the business processes and their tools for developing interfaces. The most important part of our corporate IT strategy is that we need integrated enterprise applications. That's why we bought PeopleSoft in the first place."

Most vendors say they've been trying hard to strike the right balance, recognizing their customers' need for tightly integrated core business systems and their need to accommodate additional applications from third parties. "We offer the best of both worlds," says Perry Moss, J.D. Edwards' product manager for interoperability. "We have an integrated suite with advanced E-business capabilities--E-procurement from Ariba and CRM from Siebel--and we make integration simple." But since customers may not want to use Ariba or Siebel or may need specialty soft-ware to run their businesses, Moss says, the company has spent the past year working on its architecture to make sure users can easily integrate the applications they want to add.

ERP vendors say they've recognized that even companies that haven't minded waiting for them to catch up with competent E-business and CRM apps have felt a bit behind the curve during the waiting period. Colgate-Palmolive, for instance, wasn't immediately able to join the post-Y2K boom as sales-force automation, warehouse management, supply-chain management, CRM, E-procurement, and other capabilities became a reality for more and more companies that were willing to buy those tools from other vendors. Nonetheless, the company couldn't reconcile itself to the idea that the best approach was to build out its ERP system by integrating a host of best-of-breed software products, Toben says. Just as Colgate-Palmolive is taking advantage of SAP's tight level of integration among its own modules for the company's in-house projects, Toben will be taking advantage of recent SAP enhancements that now enable companies to integrate third-party apps at the business-process level in its dealings with Transora.

Toben's view of sticking as close as possible to a single vendor is similar to the approach AMR Research urges its clients to take. In a recent report, the market-research firm advised buyers to consider the new offerings from ERP vendors before deciding to pursue an aggressive third-party integration strategy. The report's author, senior analyst Rod Johnson, says that after Y2K the attention of software buyers shifted, not back to ERP, but to E-business and software for E-procurement, CRM, and supply-chain functions. Hundreds of new application vendors appeared on the scene, with offerings aimed at solving specific business problems. More than 20 new application categories emerged in customer-facing applications, ranging from E-services to marketing analytics to personalization to E-mail response-management systems. And software buyers often took on the task of integrating a large number of such applications with their back-office systems.

With most major ERP vendors having spent the last few months enhancing and expanding their offerings to provide broad business-management and E-business capabilities, Johnson says that it's now time for software buyers to focus instead on core ERP applications that meet the larger part of their needs and then select only a small number of software products to add. "Clearly, single-vendor strategies are dead, but companies need to bet significant portions of their strategies on three or four big pieces rather than 15 piece parts," Johnson says.

Ontario Store Fixtures Inc. in Toronto, which adopted J.D. Edwards' OneWorld ERP suite in 1996, has taken the position that much of the functionality it needs must come from J.D. Edwards. "It's ERP that drives the transactions, and the ERP solution must be the foundation of the business," says Delvin Fletcher, VP of information systems at Ontario Store Fixtures. "The philosophy we operate under is very much oriented to working toward as much of a common solution as possible."

Fletcher says companies that try to integrate pieces from many vendors to get a best-of-breed IT infrastructure end up with limited functionality because cost and time constraints often lead to an inadequate integration. "Less-than-perfect integration will result in imperfect functionality," he says.

Now that J.D. Edwards has close partnerships with some best-of-breed vendors, however, Ontario Store Fixtures will be able to take advantage of new applications in the coming year without hassles that can warp functionality, Fletcher says. The company has completed the first phase of a project during which it will deploy a MicroStrategy Inc. knowledge-management package that has been pre-integrated with J.D. Edwards as part of the ERP vendor's effort to provide its customers leading functionality from other companies. Ontario Store Fixtures is also planning to take advantage of J.D. Edwards' pre-integration with Siebel Systems' CRM offering.

But one product that Ontario Store Fixtures needs to use isn't pre-integrated into J.D. Edwards applications. The company will soon begin a project to tie the ProEngineer computer-aided design software from Parametric Technology Corp. to its J.D. Edwards software. Fletcher says that no one has ever integrated a CAD package as tightly with ERP as Ontario Store Fixtures will attempt with ProEngineer; it's planning to work closely with both Parametric and J.D. Edwards on the integration project, using J.D. Edwards' XPI interoperability framework. "At the end of the day, you resolve back to the transactional engine," Fletcher says. "There always will be legitimate debate, but there has to be one core, and, as far as possible, I try to keep the ERP solution as the core."

Most of the major consulting and systems-integration firms, such as Arthur Andersen, KPMG, and PricewaterhouseCoopers, agree that customers should focus on a core ERP suite and integrate just a small number of other applications for special business requirements. Michael Herzog, KPMG managing director and senior VP for high-tech solutions, says the idea of looking to a single vendor to provide all the software functionality that a customer needs doesn't work. But the other extreme, a leading-edge approach where as many as a dozen different vendors may be involved is, he says, an "onerous" problem. He recommends that software buyers look for an ERP system that can provide 60% to 70% of what their company needs, and then integrate critical software from two or three other vendors.

Pete Koltis, an Arthur Andersen Business Consulting partner, says his firm generally advises its clients to pick an ERP vendor that fills most of its needs first, and then to look at specific applications that provide deep functionality in particular areas. "For a lot of reasons, it's better under most circumstances to go with a single vendor approach, but you have to look at it on an application-to-application basis," he says. For example, a company that depends heavily on an efficient sales force might need to integrate a sales-force-automation application from a vendor such as Siebel. David Zinn, a partner at PricewaterhouseCoopers Financial Services Consulting, points out that companies in the financial sector can't look to ERP vendors for their specialized needs. For example, regulatory reporting requirements vary widely by state or nation, and ERP vendors can't begin to provide software to cover those bases.

However, EDS urges its top-tier customers to wholeheartedly take a best-of-breed approach because they need cutting-edge functionality in a wide range of areas. The systems integrator says that integration is no longer the stumbling block it was even a few months ago. "Enterprise application integration has evolved to where plug-and-play is more real," says Robb Rasmussen, EDS's VP for E-solutions in the digital value-chain practice area. In addition to the capabilities ERP vendors themselves provide, middleware software vendors such as CrossWorlds Software, SeeBeyond, Tibco, Vitria, and webMethods provide adapters that integrate specialized applications with ERP systems and with legacy systems, too, he says.

That's the way Siebel sees it as well. Relying on just one software vendor to build and provide everything, says Siebel senior architect Skip Bacon, is a recipe for disaster: "One neck, one noose." Bacon says Siebel often encounters customers that have between a dozen and three dozen applications from various vendors; that doesn't necessarily add up to problems, he says, as long as a smart integration strategy is in place. Siebel provides for integration at the user-interface, object (COM or Corba), and abstraction-layer (which passes XML data and messages between applications) levels. Siebel also offers prebuilt connectors for SAP's R/3, J.D. Edwards' OneWorld, and Great Plains' enterprise applications. The company is also developing a connector for its next release that will link its applications to Oracle's 11i E-business suite. Siebel can be integrated with other vendors' software, including many legacy apps through middleware products.

Gary Hensley Photo by Alan Blaustein While Oracle reciprocates with prebuilt integration of applications from Siebel and SAP and lets customers use XML to integrate with other apps, the company doesn't have quite as sympathetic a view of wholesale integration with its 11i suite. The future of business software is one vendor, one suite, says Oracle senior VP and chief marketing officer Mark Jarvis. Ten years ago, a number of PC software applications dominated the market--Lotus 1-2-3 for spreadsheets, WordPerfect for word processing, dBase for database software. "But Microsoft found a way to make all those apps work together and called it Microsoft Office, and the suite is much more useful than the separate parts ever were," Jarvis says. "What you saw Microsoft do with Office, you now see Oracle do with business applications."

Are Oracle customers biting? Gary Hensley, IT director for juice and food-bar company Odwalla Inc. in Half Moon Bay, Calif., says his company wanted a totally integrated system, which is why it signed up for Oracle 11i's financial, reporting, and manufacturing applications. Yet Oracle isn't providing every core component. Odwalla's store-delivery applications, which manage more than 80% of its revenue, are to be provided by Numeric Computing Systems after a search that included several other companies. Integrating the new application with Oracle doesn't worry him, Hensley says. "Part of the evaluation was for these folks to integrate with Oracle," he says. "One of Oracle's strong points is building interfaces to just about anybody."

Depending on how critical an application is, some companies might even be willing to overlook the fact that it doesn't integrate well with core ERP software. That's the case at $6 billion GKN Automotive Inc. of Timberlake, N.C. Neither Kronos Inc.'s software for time and attendance, employee scheduling, shop-floor labor allocation, activity tracking, and labor analytics nor Computer Associates' Manman Manufacturing, which includes production management and financials applications, easily integrates with GKN's PeopleSoft 7 human-resources apps or with the PeopleSoft 8 HR apps it recently installed. The reason: There are no open APIs or other common integration points in the third-party software. But, says project manager Ted Bishop, because these products are so important to the company, any problem integrating applications is simply overlooked and workarounds have been developed.

Ted Bishop Photo by Jerry Wolford At the end of each business day, payroll and benefits data from the PeopleSoft HR apps is exported to the Kronos software, which is used as the company's primary financials system, and at the end of the week information from the CA and Kronos apps is imported into PeopleSoft. Software connectors have been set up that enable the import and export operations to be completed when an authorized person executes a software command. "It would be nice if all the systems' architecture was similar so that manual intervention wasn't needed for the import and export operations," Bishop says. "It's an issue of how the other applications handle data. We're looking for them to make data easier to get at."

A spokesman for CA says the best way to integrate Manman with PeopleSoft and other applications is to use its new BizWorks E-business-intelligence suite, which includes enterprise application integration connectors for PeopleSoft 8. The BizWorks suite starts at $125,000. Richard Young, Kronos director of service solutions, says newer versions of Kronos' products offer XML integration, and the company publishes its APIs to simplify deep integration.

GKN's priority is now building an interface between the PeopleSoft HR apps and PeopleClick.com, an Internet employee recruiting service that handles much of the details of hiring for GKN, and between PeopleSoft HR apps and an outside provider (which GKN hasn't yet selected) to handle management of employee 401(k) plans. Bishop says PeopleSoft's Web-based architecture makes integrating such services a "non-issue." The interfaces will be quick and easy to build, he says.

As Marathon Oil Co. looks to a future in which mySAP.com will be the engine behind its worldwide operations, it's counting on the software's business APIs and XML integration capabilities to make it easy for the company to connect numerous systems in use around the globe to the ERP platform. Marathon, which last month closed a 1,450-seat deal for SAP software that analysts say is worth between $7.5 million and $10 million, requires integration of its mySAP.com apps with Tobin International land-management software, Schlumberger's GeoQuest Systems geoscience, engineering and drilling applications, and Landmark Graphics' oil and gas reservoir management apps--all key tools for Marathon scientists, engineers, and oil-field managers.

Marathon will use mySAP.com's B-to-B capabilities to manage transactions with customers and suppliers, says Gary Newberry, the executive managing the SAP deal. The idea of being locked into SAP never occurred to Marathon, he says. "One of the primary reasons we chose to implement SAP at this time is it will allow for seamless flow of information within the company from users throughout the world using various tools," Newberry says.

One thing is clear: It's becoming increasingly possible for companies to achieve the seamless flow they desire, whether they're relying primarily or solely on one vendor or are looking to a handful or more of third-party companies to help them deliver on their E-business aspirations.